Where Finance Finds Its Future Is it the destiny of Blockchain to become the Open Infrastructure?
Jul 8, 2022
01:08:06
A Future of Finance Webinar that investigates whether the adoption and impact of Blockchain could be accelerated by pursuing an infrastructural strategy that lowers the cost of adoption, recovers the openness of the early Internet and facilitates inter-operability between different networks. A major economic mystery is why a general-purpose technology such as digital computing has not transformed productivity. After all, the marginal cost of producing further copies of software is effectively zero. Part of the answer, despite 25 years of the Internet and open-source software, is that software lacks an open infrastructure akin to the electricity grid or the road network. A true infrastructure is a shared and (crucially) open means to many ends. It creates value obliquely rather than vectorally, by enabling third party businesses and entrepreneurs to create new and innovative products and services on a reliable and low-cost foundation. Instead, the value created by digital technology is currently being privatised, chiefly by the massive data extraction platforms such as Facebook, Google, Microsoft, Uber and Airbnb, which have used network effects to build powerful monopolies. Although they do provide platforms for third-party businesses to advertise and sell, they take a turn on transactions, extract data from transactions for sale to third parties and suppress innovation through a combination of patents, purchases and the blight cast on innovation by their sheer size and invulnerability. A true infrastructure would spawn a constant series of innovations, as the electricity grid did and does (including, ironically, digital computing). And there are now signs that just such an infrastructure is coming into being in the financial markets. Open Banking and Open Finance are prising open the closed customer bases and data sets of incumbent firms, presaging the emergence of an Open Data economy in which customers rather than companies drive the evolution of economies. Forward-thinking financial institutions (such as LSEG) are embracing this shift from data platforms to open data networks by introducing their clients to third party product and service providers via a blockchain-based network. Blockchain is an obvious rather than inspired choice to fulfil the role. It is intrinsically decentralised and networked. At its heart lies the concept of simultaneous data-sharing. So Blockchain is the natural infrastructural underpinning of the networked markets that are now primed to succeed the platforms controlled by the large technology companies. Unfortunately, Blockchain has until recently succumbed to the same supply-side economics that has prevented previous digital technologies from transforming productivity: networks are fragmented by incompatible protocols designed to privatise and protect the profits of successful blockchain ventures. But there is work in hand today that is enabling blockchain to rediscover its original vocation. Efforts to bridge protocols by agreed data communication standards is one part of it. But there are also collaborative public-private enterprises such as the LACChain Alliance in Latin America, Alastria in Spain and the Blockchain Services Infrastructure (EBSI) in the European Union (EU) which aim to provide open, low cost blockchain infrastructures to innovative businesses.
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